The CBD market is expected to skyrocket over the coming years, driven by strong demand from consumers for wellness products, favorable regulatory momentum spurred by the passage of the 2018 Farm Bill and mounting investment by major corporate players.
CBD, short for cannabidiol, comes from the cannabis plant, but contains no THC, so it doesn’t make consumers high. CBD has been hailed for potentially reducing symptoms of anxiety and chronic pain.
In early April, the U.S. Food and Drug Administration (FDA) announced that a review of regulations that govern the use of the cannabis derivative CBD could lead to a reconsideration of how CBD is regulated. The agency plans to organize a high-level, internal agency working group “to explore potential pathways for dietary supplements and/or conventional foods containing CBD to be lawfully marketed, including a consideration of what statutory or regulatory changes might be needed and what the impact of such marketing would be on the public health.”
At press time, a public hearing was also set for May 31, to allow stakeholders to share their experiences and challenges with these products, including on product safety.
“While the availability of CBD products in particular has increased dramatically in recent years, open questions remain regarding the safety considerations raised by their widespread use,” former FDA Commissioner Scott Gottlieb noted. “It’s critical that we address these unanswered questions about CBD and other cannabis and cannabis-derived products to help inform the FDA’s regulatory oversight of these products.”
CBD-infused items that fit naturally into the c-store channel can include disposable vapes, pre-rolls, beverages — including single-serve tea bags that can be steeped at the store — mints/candy/gum, lip balms and even patches. Both Molson Coors and Constellation Brands are participating in the Canadian market.
C-store retailer reactions to the coming of CBD products vary.
A spokesperson for 7-Eleven Inc., for example, told CSD in a statement, “7-Eleven Inc. does not support or promote the sale of cannabis-based products, including those with cannabidiol (CBD).”
Others, however, have not only begun adding CBD items, but are already seeing encouraging results.
“As the product becomes more and more accepted and understood — that there isn’t any THC in the product — the sales will continue to grow,” predicted Jon Fleck, merchandising manager for Cenex Zip Trip in Spokane Valley, Wash., which operates 36 Cenex Zip Trip retail locations in Minnesota, Montana, North Dakota, South Dakota and Wyoming. “Whether it’s word of mouth or from the news that some Walgreens and CVS drug outlets are placing it into their stores, consumers are becoming more open-minded and seeing the benefits of this non-psychoactive cannabis option for their symptoms.”
Zip Trip started selling CBD products in a limited number of stores in late December 2018 and saw enough movement to stock them in 30 of its sites. “It has by far paid for itself plus more and it will only continue to grow,” Fleck said.
CBD gummies and capsules account for more than half the chain’s CBD sales volume. “Liquid ‘shots’ are the next best-sellers out of the eight different CBD options we carry,” Fleck said.
C-store operators should do well with CBD lines in the years to come, Fleck predicted, if they handle them properly. “The product must be easily seen for best-selling results,” he said. Zip Trip features acrylic cases on the front counter, to clearly show customers it sells CBD.
“Any retailer that brings in more than a few options, places them in plain view and keeps the display full will see results. As long as it continues to be legal, we will sell this high-margin item in our stores,” Fleck said.
It’s too early to know where the segment is headed, but it’s being talked about seemingly everywhere, noted Justin Alford, who along with his father and brother owns B-Quik Convenience Stores and Benny’s Car Wash & Oil Change in Baton Rouge, La.
“Our local association, the Louisiana Oil Marketers Association, recently had a meeting with lots of discussion,” Alford said. “The local ATF (the federal Bureau of Alcohol, Tobacco, Firearms and Explosives) has not given much direction on it either, but said they will still try and enforce the local laws.”
Still, the Alford family also expects CBD to grow in the years to come. “I do think it could be profitable and will be a category for c-stores,” said Alford. “But right now we are proceeding with much caution.”
CBD products cover a wide range of SKUs across categories and are growing at a remarkable rate, said Ryan Mathews, founder and president of Black Monk Consulting in Royal Oak, Mich. “If the pattern of reforming state laws continues, that growth will only accelerate. Look for an initial wave of wellness products, especially CBD lotions, and beverage products — alcoholic and otherwise — to hit the market first,” he said.
Maria Steingoltz, managing director for L.E.K. Consulting in Boston, said based on her firm’s research among consumers, growth is all but inevitable. “With products continuing to enter the mainstream, we expect to see more day-to-day use of consumer products such as edibles, tinctures, vape, lotions and creams with CBD, subject to evolving regulation,” Steingoltz said.
Consultant Nicole Leinbach Reyhle, Chicago-based founder of the Independent Retailer Conference, pointed out that CBD products are increasingly becoming more mainstream and more widely accepted among consumers across all generations. “Wellness and beauty products that incorporate CBD are becoming increasingly popular, with items that range from shampoo to facial skincare to body lotion that helps to ease pain and more,” Reyhle said.
Legislators across America are still grappling with how to approach CBD. “State laws continue to be obstacles, and mass distribution will require significant consumer education to reinforce the message that CBD won’t get you ‘high’ like THC,” said Mathews. “But there is a tsunami of corporate money being spent on promoting these items, and consumer acceptance, according to research by companies like A.T. Kearney, is quite widespread.”
For that reason, Mathews expects the market to continue to expand for the next five to 10 years.